B-158608, JUL. 29, 1966

B-158608: Jul 29, 1966

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

TO KAISER JEEP CORPORATION: FURTHER REFERENCE IS MADE TO YOUR TELEGRAM DATED FEBRUARY 25. BIDS WERE ORIGINALLY SCHEDULED FOR OPENING ON OCTOBER 20. THREE AMENDMENTS TO THE IFB WERE ISSUED AND BIDS WERE SUBSEQUENTLY RESCHEDULED FOR OPENING ON NOVEMBER 17. THE POST OFFICE DEPARTMENT ADDED SEVERAL SPECIAL FEATURES TO THE PROCURED VEHICLES WHICH WERE NOT INCORPORATED IN PREVIOUS ONE-HALF TON MAIL DELIVERY TRUCKS. THE ONLY FIRM THAT SUBMITTED A BID UNDER THE SUBJECT INVITATION WAS THE KAISER JEEP CORPORATION. THIS DECISION WAS ARRIVED AT BECAUSE KJC'S BID WAS FIFTEEN PERCENT HIGHER THAN ITS BID PRICE FOR PRODUCTION OF SIMILAR VEHICLES A YEAR AGO. THESE PROPOSED CHANGES WERE REJECTED BY THE POST OFFICE DEPARTMENT ON THE GROUNDS THAT SUCH ACTION WOULD NECESSITATE CHANGES IN THE SPECIFICATIONS AS ADVERTISED AND READVERTISEMENT WOULD BE NECESSARY TO RETAIN THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM.

B-158608, JUL. 29, 1966

TO KAISER JEEP CORPORATION:

FURTHER REFERENCE IS MADE TO YOUR TELEGRAM DATED FEBRUARY 25, 1966, PROTESTING THE ACTION OF THE GENERAL SERVICES ADMINISTRATION IN CANCELLING INVITATION FOR BIDS NO. FPNMV-L-80874-A FOLLOWING THE WITHDRAWAL OF A PURCHASE ORDER REQUEST BY THE POST OFFICE DEPARTMENT.

THE ABOVE-REFERENCED INVITATION SOLICITED BIDS FOR 3,306 ONE-HALF TON, 4 BY 2, RIGHT-HAND DRIVE MAIL DELIVERY TRUCKS IN ACCORDANCE WITH THE SPECIFICATIONS IN THE INVITATION. BIDS WERE ORIGINALLY SCHEDULED FOR OPENING ON OCTOBER 20, 1965, BUT, AS A RESULT OF THE NEED TO CLARIFY SEVERAL OF THE SPECIFICATIONS, THREE AMENDMENTS TO THE IFB WERE ISSUED AND BIDS WERE SUBSEQUENTLY RESCHEDULED FOR OPENING ON NOVEMBER 17, 1965. APPARENTLY, THE POST OFFICE DEPARTMENT ADDED SEVERAL SPECIAL FEATURES TO THE PROCURED VEHICLES WHICH WERE NOT INCORPORATED IN PREVIOUS ONE-HALF TON MAIL DELIVERY TRUCKS. CONSEQUENTLY, THE ONLY FIRM THAT SUBMITTED A BID UNDER THE SUBJECT INVITATION WAS THE KAISER JEEP CORPORATION. UPON OPENING OF KJC'S BID, THE CONTRACTING OFFICER DETERMINED THE PROCUREMENT WOULD NOT BE ECONOMICALLY FEASIBLE AS THE NEEDS OF THE GOVERNMENT COULD BE SERVED AS WELL BY A LESS EXPENSIVE VEHICLE. THIS DECISION WAS ARRIVED AT BECAUSE KJC'S BID WAS FIFTEEN PERCENT HIGHER THAN ITS BID PRICE FOR PRODUCTION OF SIMILAR VEHICLES A YEAR AGO. KJC HAS EXPLAINED THIS INCREASE IN PRICE AS DUE TO CHANGES IN THE VEHICLE FROM THE PREVIOUS YEAR, INCREASES IN PRICES OF MATERIALS FROM SUPPLIERS, AND INCREASES IN LABOR COSTS. KJC OFFERED TO MAKE SEVERAL CHANGES IN ITS BID PRICE, BUT THESE PROPOSED CHANGES WERE REJECTED BY THE POST OFFICE DEPARTMENT ON THE GROUNDS THAT SUCH ACTION WOULD NECESSITATE CHANGES IN THE SPECIFICATIONS AS ADVERTISED AND READVERTISEMENT WOULD BE NECESSARY TO RETAIN THE INTEGRITY OF THE COMPETITIVE BIDDING SYSTEM. KJC WAS THEREAFTER ADVISED BY THE GENERAL SERVICES ADMINISTRATION ON FEBRUARY 11, 1966, THAT THE IFB WOULD BE CANCELLED SINCE THE POST OFFICE DEPARTMENT HAD WITHDRAWN ITS PURCHASE REQUEST. KAISER JEEP CORPORATION CONTENDS THIS SECTION WAS NOT CONSISTENT WITH THE FEDERAL PROCUREMENT REGULATIONS IN THAT (1) THE CONTRACTING OFFICER LACKED COMPELLING REASONS FOR CANCELLING THE INVITATION; (2) THE FPR WERE NOT COMPLIED WITH IN THAT THERE WAS NO WRITTEN JUSTIFICATION FOR CANCELLATION; AND (3) KJC WAS NOT NOTIFIED OF THE REASONS FOR THE CANCELLATION AS REQUIRED BY THE FPR. WE DO NOT AGREE WITH ANY OF THESE CONTENTIONS.

IN REGARD TO KJC'S FIRST CONTENTION, IT IS REPORTED THE POST OFFICE DEPARTMENT FELT THE PROCUREMENT AT THE BID PRICES WOULD NOT BE ECONOMICALLY FEASIBLE BECAUSE OF THE AFOREMENTIONED FIFTEEN PERCENT INCREASE OVER THE PREVIOUS YEAR'S PRICE. RATHER THAN PAY THE INCREASED PRICE, THE POST OFFICE DEPARTMENT DETERMINED THE GOVERNMENT'S NEEDS COULD BE SERVED AS WELL BY A LESS EXPENSIVE VEHICLE WHICH WOULD BE SOLICITED UNDER A READVERTISEMENT DELETING SEVERAL OF THE SPECIAL FEATURES WHICH WERE INCORPORATED IN THE SPECIFICATIONS FOR THE NEW TRUCK. IT IS HOPED THIS WILL HAVE THE TWO-FOLD EFFECT OF DIRECTLY REDUCING THE PRICE PER VEHICLE AS WELL AS INCREASING COMPETITION AMONG OTHER MANUFACTURERS. THE AUTHORITY FOR CANCELLATION IN THIS SITUATION IS FPR 1-2.404-1 WHICH PERMITS CANCELLATION OF AN IFB AFTER BID OPENING ONLY FOR CERTAIN SPECIFIED ,COMPELLING" REASONS SUCH AS THAT NOTED IN SUBSECTION (B) (4) AS FOLLOWS:

"BIDS RECEIVED INDICATE THAT THE NEEDS OF THE GOVERNMENT CAN BE SATISFIED BY A LESS EXPENSIVE ARTICLE DIFFERING FROM THAT ON WHICH THE BIDS WERE INVITED.'

CONTRACTING OFFICERS ARE CLOTHED WITH BROAD POWERS OF DISCRETION IN DECIDING WHETHER AN IFB SHOULD OR SHOULD NOT BE CANCELLED AND THIS OFFICE WILL NOT INTERFERE WITH SUCH A DETERMINATION UNLESS IT IS ARBITRARY OR CAPRICIOUS AND NOT BASED ON SUBSTANTIAL EVIDENCE. 39 COMP. GEN. 396, 399. TO DO OTHERWISE IS TO IMPEDE THE EFFICIENT ADMINISTRATION OF GOVERNMENT. IN THE INSTANT CASE THE CONTRACTING OFFICER BASED HIS DECISION PRIMARILY ON THE FACT THAT KJC'S BID WAS FIFTEEN PERCENT HIGHER THAN ITS BID FOR THE PREVIOUS YEAR AND THAT IT WOULD BE IN THE BEST INTERESTS OF THE GOVERNMENT TO PROCURE A LESS EXPENSIVE ALBEIT SOMEWHAT LESS EFFICIENT VEHICLE. AS NOTED ABOVE, THE CONTRACTING OFFICER HOPED ALSO THAT THE REVISED SPECIFICATIONS WOULD HAVE THE ADDED BENEFIT OF INDUCING GREATER COMPETITION. THE REALIZATION THAT A SET OF SPECIFICATIONS MAY NOT REFLECT THE ARTICLE MOST ADVANTAGEOUS TO THE GOVERNMENT IN A GIVEN CASE IS SHOWN IN FPR 1 2.404-1 (B) (4) AS WELL AS IN GSA STANDARD FORM 33-A "BIDDING INSTRUCTIONS, TERMS, AND CONDITIONS.' PARAGRAPH 8 (B) OF THE LATTER IS AS FOLLOWS:

"THE GOVERNMENT RESERVES THE RIGHT TO REJECT ANY OR ALL BIDS AND TO WAIVE INFORMALITIES AND MINOR IRREGULARITIES IN BIDS RECEIVED.'

THUS, THE GOVERNMENT HAS RESERVED TO ITSELF A "WAY OUT," AS IT WERE, IN BOTH THE REGULATIONS AND THE CONTRACT WHEN IT BECOMES EVIDENT THAT ACCEPTANCE OF ANY BID WOULD BE DISADVANTAGEOUS TO THE GOVERNMENT. WE FEEL THIS IS AS IT MUST BE, FOR THE GOVERNMENT MUST HAVE A MEANS OF PROTECTING ITSELF FROM BEING FORCED INTO A BAD BARGAIN. OF COURSE, ONLY TIME WILL TELL IF THE CONTRACTING OFFICER HAS MADE THE CORRECT DECISION, BUT, IN VIEW OF THE FACTS INVOLVED HEREIN, WE CANNOT SAY HIS DECISION WAS ARBITRARY, CAPRICIOUS, OR NOT BASED ON SUBSTANTIAL EVIDENCE.

KAISER JEEP'S SECOND CONTENTION, THAT 41 U.S.C. 253 (B) AND FPR 1 2.404-1 (B) WERE NOT COMPLIED WITH IN THAT THERE WAS NO WRITTEN JUSTIFICATION FOR THE REJECTION OF BIDS, IS WITHOUT MERIT. THE FORMER SECTION CONTAINS NO SUCH REQUIREMENT; BOTH PERMIT CANCELLATION OF AN INVITATION WHEN IT IS IN THE PUBLIC INTEREST TO DO SO, WHEN SUCH ACTION IS IN THE BEST INTEREST OF THE GOVERNMENT. THE FPR SECTION ADDS THE REQUIREMENT THAT THE CONTRACTING OFFICER SO DETERMINE IN WRITING. WE HAVE IN THE RECORD BEFORE US A COPY OF GSA FORM 1535 CONTAINING THE FOLLOWING STATEMENT:

"THEREFORE, IN ACCORDANCE WITH FPR 1-2.404-1 (B) (4), IT IS PROPOSED THAT THIS INVITATION BE CANCELLED.'

THE FEDERAL PROCUREMENT REGULATIONS STATE SPECIFICALLY THAT WHEN THE CONDITIONS ENUMERATED IN SECTION 1-2.404-1 (B) (1-5) EXIST, IT IS IN THE BEST INTEREST OF THE GOVERNMENT TO CANCEL THE INVITATION. THUS, WE FEEL THE FAILURE TO USE CERTAIN "MAGIC" WORDS IS NOT FATAL INASMUCH AS THEY WERE SPECIFICALLY REFERRED TO. FURTHERMORE, GSA REPORTS IT IS THEIR USUAL PROCEDURE IN CASES LIKE THIS ONE TO MAKE SUCH FINDINGS ON FORM 1535.

FINALLY, KJC'S THIRD CONTENTION IS THAT THEY WERE ENTITLED TO WRITTEN NOTIFICATION OF THE REASONS FOR CANCELLATION OF THE INVITATION. IN THIS REGARD, FPR 1-2.404-3 STATES AS FOLLOWS:

"WHEN IT IS DETERMINED TO REJECT ALL BIDS, THE CONTRACTING OFFICER SHALL NOTIFY EACH BIDDER THAT ALL BIDS HAVE BEEN REJECTED, STATING THE REASON FOR SUCH ACTION.'

NOWHERE IS THEIR A REQUIREMENT THAT SUCH NOTIFICATION BE IN WRITING OR THAT IT BE FORMALIZED TO ANY EXTENT. AN INFORMAL TELEPHONE CALL OR CONFERENCE IS CONTEMPLATED BY THE FPR AS BEING SUFFICIENT. HOWEVER, NOTWITHSTANDING THE ABOVE, KJC WAS ADVISED BY GSA ON FEBRUARY 11, 1966, BY LETTER, OF THE REASON FOR THE CANCELLATION OF THE IFB, SPECIFICALLY, BECAUSE THE POST OFFICE DEPARTMENT HAD WITHDRAWN ITS PURCHASE REQUEST. FAR AS GSA, THE PROCURING ACTIVITY, WAS CONCERNED, THE WITHDRAWAL OF THE PURCHASE REQUEST TERMINATED ITS AUTHORITY TO PROCURE THE VEHICLES. THUS, THIS WAS INDEED THE REASON FOR THE CANCELLATION. IN OUR OPINION, GSA COMPLIED FULLY WITH THE NOTICE REQUIREMENTS OF THE STATUTE AND OF THE FPR.

WE HAVE, IN ADDITION, CONSIDERED YOUR FURTHER CORRESPONDENCE OF JULY 5, 1966, AND THE ADMINISTRATIVE REPORT FROM THE GENERAL SERVICES ADMINISTRATION DATED JULY 18, 1966, AND FIND NOTHING HEREIN WHICH PERSUADES US TO CHANGE OUR VIEWS IN ANY RESPECT. INDEED, THE SUPPLEMENTAL ADMINISTRATIVE REPORT STRONGLY SUPPORTS OUR CONCLUSIONS.

ACCORDINGLY, WE MUST CONCLUDE THAT THE FACTS AND CIRCUMSTANCES IN THIS CASE DICTATE DENIAL OF YOUR PROTEST.